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ARTICLE · 02 FEBRUARY 2015

Capital Inadequacy Under Turkish Commercial Code

Öncel, Aydin & Uygun Attorney Partnership
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Article 376 of the TCC regulates specific cases of capital inadequacy in joint stock and limited liability companies and requires certain corporate actions to be taken in each case.

TurkeyCorporate/Commercial Law
Erman Öncel, LL.M. Esq.
Erman Öncel, LL.M. Esq.
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1. General Rule

Article 376 of the Turkish Commercial Code ("TCC") regulates specific cases of capital inadequacy in joint stock and limited liability companies and requires certain corporate actions to be taken in each case.

1stCase: If it is clear in the last annual balance sheet that 1/2 of the sum of the capital and statutory reserves (including items listed under Article 519 of the TCC) is unsecured due to loss, the Board of Directors ("Board") in a joint stock company (or manager(s) in a limited liability company) must immediately convoke the General Assembly and present remedial measures they consider appropriate, such as capital increase, close of certain part of business, sale of affiliates, etc. The Board (or manager(s)) must present this issue to the General Assembly in a thorough and transparent manner, otherwise they may be held liable under the TCC for failing to fulfill their duties.

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